America's K-Shaped Economic Crisis, Unemployment Wave Begins, & Iran War Spiraling

0:00Michael Novogratz:This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, Sponsored Jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a$75 sponsored job credit at Indeed.com slash podcast. Terms and conditions apply. Zootopia 2 has come home to Disney+. Let's go! Get ready for a new case. We're the greatest partners of all time! New friends.

0:35Michael Novogratz:Gary the Snake. And your last name? The Snake. Dream Team. And new habitats. Zootopia has a secret reptile population. You can watch the record-breaking phenomenon at home. Zootopia 2, now available on Disney Plus Rated PG. And right now you can get Disney Plus and Hulu for just$4.99 a month for three months with a special limited time offer ends March 24th. After three months, plan auto renews at$12.99 a month. Terms apply. Bernie Sanders was out there today saying that Elon Musk has more net worth than the bottom 54 % of America. 54%, not even 50. 50 % of all consumption is done by the top 10%.

1:09And so we have this K-shaped economy. It is really good to be rich right now. And you're getting richer and there's great restaurants and that economy still is humming. And on the bottom half of our country, people are suffering.

1:20Michael Novogratz:Is that a political risk that you have to factor in to your macroeconomic investment? You could have a Bernie Sanders-Mondani revolution. Welcome to All Things Markets with me, Anthony Scaramucci. And I'm Mike Novogratz. Novo, we're going to talk about that red suit at some point today. But right now, we are recording this. I did not like that article. How can you wear red? But man, red is down. When I see red on the screen, down. Yeah, we're green, Michael. Anyway, we are recording this at 4.30 Eastern Standard Time, Thursday, March 19th. Thursday, March 19th, the day where the markets literally, you didn't think fixed income would sell off as much as it did.

2:05I think this was one of the largest sell-offs in short-end UK rates that I can remember. European rates, US rates. We're now pricing in rate hikes in Europe, 50 basis points or more of rate hikes in Europe. And we're pricing in absolutely no rate cuts in the U.S.

2:24Michael Novogratz:Michael, I mean, look, I read through the minutes yesterday and I listened to the Fed chairman's press conference. You know, he's saying three quarters of the inflation is related to tariffs. He's now worried about a potential energy crisis going into the summer. so if you were on the board of government by the way president trump's own nominations to the board of governors they agreed with him i mean they there was nobody no real pushback yeah but listen we know oil shocks supply shocks are transient it comes and it goes and you've already got a credit crisis that's brewing right like when credit seizes up economy's slow and so you've got you got a lot of body punches that are hitting this economy at the same time.

3:12And to think we're going to be raising rates into that is, is, is I think just strange thinking. Now, because everyone thought like me and was very long the front end, this is a gigantic position unwind. You know, last week I said advice to young traders in correlated risk unwinds, get out of everything. Should've listened to my own advice.

3:36Michael Novogratz:I get it because you're hoping you don't want to get caught on the other side of it either where all of a sudden the war is ending. There's a ceasefire and there's a general agreement about what's going to happen. Trump could taco any day. He is such a difficult leader to trade around because he makes things up. He changes his mind. He's funny some days. He's an ass some days. at the end of the day the market rallied because Benjamin Netanyahu came out and broadly gave the script the narrative that we could end the war we've got all their you know weapons grade uranium they can't make any more we've destroyed all their missiles all the things for Trump to taco uh Bibi did in a pretty graceful way now he said well we've got more stuff to do But that sets the stage up, I think, for Trump to back out because he kind of lost his own credibility.

4:35Beebe doing the tacoing for Trump, or at least the canary in the coal mine. I mean, that's what the market read late in the day. It's why it rallied back a percent.

4:46Michael Novogratz:We lost 92 ,000 jobs in February. Are you surprised by that? You know, no. And you saw today Dell met a rumor to be cutting 14 ,000. Dell, some giant, you know, job cuts. Every CEO in America is looking at Claude and saying, I got to do something or I'm going to get crushed. And that something is replace jobs with agents. And so I just think that's going to be a story. I mean, what I really think is politics in 2026 and certainly in 2028, this is going to be the issue. How do we deal with AI? Just step back for a second. You've got three things happening at once. I don't think we've had anything happen like this since the 1970s.

5:40You've got a price shock.

5:43Michael Novogratz:You know, and I know, you can't just turn the spigot back on you've got you know you have nowhere to store the oil so they had to stop production in a lot of the Gulf countries uh it takes three six in some cases nine weeks to put it back on right yeah so tell me tell me what you're thinking not gas prices were up more today than they've ever been in one day in Europe uh Qatar lost 17 18 percent of their total production capacity. It'll take four to five years to rebuild that. I read they had spent $25 billion and sustained 20 billion of damage. So they're not feeling good. And so I think this is going to be harder to get through than just turn the pipes back on.

6:36and so it's going to make it again that will be inflationary but I think that inflation shock which you know Europe might react to and the U.S. might not we'll see Madame Lagarde was pretty crisp today I thought she was right down the middle and then someone leaked an article oh they might hike again does this stuff translate into wage expectations and into the inflation cycle or is it just oh shit gasoline got more expensive it'll go down in six months and right now because those are really demand destruction things right if your gas prices go up you're spending less at the supermarket uh and so i i don't see this as inflation is as the kind of inflation that the fed should react to okay all right so then that

7:28Michael Novogratz:makes the case that the short race will rally again if and when this thing ends. And hopefully this is weeks and not months. But let's go to your and my, or at least one of our favorite assets. That's Bitcoin. Bitcoin looked like at the start of this, it was decoupling a little. It rallied from 67, 68 up into the 76 ,000 range. Oh, it felt good. It felt good. But you're now back to probably your, my favorite number, 69 ,000. although Elon Musk is 69 ,420. But what happened there? And do you think Bitcoin will decouple? Do you think that there's a structural shift going on? Or is it premature to say that?

8:07The good news and the bad news about this is I would say that the major reason Bitcoin rallied so impressively was that Michael Saylor was back in the saddle. And he was selling Microsoft shares to buy Bitcoin because they're trading at a premium to his NAV. he was also selling his perpetual preferred strc 11 and a quarter percent he was selling a lot of it and so what's that doing that's leveraging up micro strategy and he's willing to do that at 11 a year because he thinks bitcoin's going to grow more than 11 a year and people trust that he's not going bankrupt. You know, he, he said a lot of dollar reserve to pay for his dollar, uh, coupons that he has.

8:58And, and so he's got this machine going, this fixed income machine plus the equity machine. And that was buying most of the Bitcoin, which was driving other people into the market. When that stops because market starts coming down for other reasons, and he's not as aggressive, the natural buyer of Bitcoin, i.e. him. And again, it's not Michael Saylor himself buying the Bitcoin. It is, there's a giant retail base in America that has taken their crypto exposure through micro strategy. You know, he's about half and all the other ETFs are the other half. So Ibit, you know, all of them, he had put them together.

9:40and retail was buying. And all of a sudden this, the last two days people got scared. And, you know, all of a sudden you had a nice run from 60 to 76 and profitating comes out. This will be a really interesting area if we can hold this 68, 69 and grind back up. I think then it'll go to 80, but it's going to be correlated a little bit with the rest of the market. So if you think about it, gold got destroyed today silver got destroyed today today was a day where people who had positions had to get out of them dollar yen sold off euro rallied it was get out of what you were in the risk managers at the big pod shops had their big stick and they were smacking people

10:25Michael Novogratz:on the hands you know michael asset prices are still pretty high you know they're they're near all-time highs despite the current correction going on as a result of the war stocks stocks Stocks don't go down. Stocks don't go down. And this is also near and dear to you because I know all the work that you do in New York, Robin Hood, charity work, et cetera. You know, food bank usage in the United States, not even just here in New York City. I'm talking about the 50 states. The food bank uses at the all-time high, Michael. So you have high asset prices and food uses at an all-time high, which is the definition of a tag.

11:01I mean, Bernie Sanders is out there today saying that Elon Musk has more net worth than the bottom 54 % of America. 54%, not even 50. And it's now -

11:11Michael Novogratz:So is there some political and systemic risk - 50 % of all consumption is done by the top 10%. And so we have this K-shaped economy. It is really good to be rich right now. And you're getting richer and there's great restaurants and that economy still is humming. And on the bottom half of our country, people are suffering. But I guess the question is, is that a political risk that you have to factor in to your macroeconomic investing in your decision making? It's a huge risk. You could have a Bernie Sanders-Mondani revolution. It's coming. I mean, you saw Washington State pass the 10 % tax. California's messing with one.

11:51I don't think it'll pass, but they already chased out five or six of the richest guys in the state. I keep trying to tell the blue state mayors and governors that tax should be done at a federal level, not at a state level. Otherwise, you're just going to chase your people away. But and Ray Dalio is talking about this a lot. When the inequality gets this wide, you have wealth taxes or you have some seizure of people's earnings and wealth. And so there's going to be some form of tax revolution that comes. What you're hoping, good centrist Democrat, is that we get rational policy that doesn't raise taxes just to blow up governments where we're wasting money.

12:37But we're going to need more. And I think Lloyd said this on your show when you were on Bill Maher. You're going to need more redistribution. Can you do that gracefully? Can you do that with dignity?

12:48Michael Novogratz:I mean, that's why, you know, I'm looking at the history. Teddy Roosevelt basically went to the robber baron and said, knock it off. We did a little bit of trust busting at that time to make things a little flatter. You know, Rockefeller had two and a half percent of the GDP in terms of his net worth. That was probably too much in terms of the concentration. Again, all this is happening, Michael. And let me give you these numbers from China. the industrial overcapacity is at the highest level that it has been since 2008. And therefore, they're flooding the global markets with cheap goods away from the United States because of the tariffs.

13:31Michael Novogratz:I guess, you know, what do you say there? I mean, would you recommend that we accepted some of those relaxation on the tariffs during a time of war? Or, you know, Where do you go? Because I'm fairly certain that the average American is looking at their paycheck as saying, OK, more of it's going to gas, more of it's going in a tax increase. Let's be really honest. Tariffs are a form of a consumption tax, right? Yeah, but it's a regressive tax. I agree. I agree. I agree. And so Trump was like, I can do away with the income tax and replace it with tariffs. That's a regressive tax. We need progressive taxes and we need them to be done fairly.

14:15And the problem with our tax code is there's nothing fair about it. When I mean that, if you're in the top tax bracket, everyone should roughly pay the 35 or 40 % or whatever we decide is a fair amount. Not some guys paying none because they're depreciating their real estate or they're depreciating their CapEx fast or there's so many ways to get around tax tax that you can have a table of 10 guys that all make$10 million a year. And the disparity of what they make pay in taxes can go from 5 % to 50%. Like that's crazy. We need a simpler tax code because we're going to need to tax people more. We're going to need to give it, distribute it in a way that doesn't steal people's dignities where you're calling them welfare queens.

15:03in essence you should just because you're an american citizen benefit from the infrastructure that's been built up in america and so you know if you're in norway they've got that sovereign wealth fund that gives everyone some money because they have the oil we don't we have natural resources we have intellectual resources we have the the reserve currency and so you could actually tell a story where that ubi or that government assistance and it's not like we don't do it now. We just do it really inefficiently, right? We're 41 % or something of GDP as government spending. That's higher than China, by the way.

15:41We're going to think China's a socialist and we're capitalists. We're about 41, 42 % of total spending is done by state, local, and federal government. In China, that number is 35%.

15:52Michael Novogratz:Let's switch topics. I want to go to AI for a second, and I'm going to read you this stat, which you know well, which I still find staggering. But NVIDIA's revenues went from$27 billion in 2022 to$216 billion in 2025. Market capitalization peaked to$5 trillion. They're now forecasting, and this is from Jensen himself, the CEO. Jensen Wang is saying that they're forecasting$1 trillion in ship demand backlog. So they're doubling down on their inference trips. They're acquiring talent. They just did the Grok deal. What do you make of all that, Michael? Is that a$10 trillion company in five years?

16:38You know, it's tempting to get short the stock market because there's so much going on. And, you know, the P on the overall market looked expensive. And then you start looking at companies like NVIDIA. And, you know, one of my buddies was looking at it and said, geez, if you look at their 27 earnings, it's only trading 10 times. 27. Their earnings are growing so fast. anthropic might have the fastest growing company in the history of the planet uh right and and so i just know this is such a big story that it will end in a bubble but this isn't the bubble like the bubble for the biggest story in our lifetime is going to be something stupid and so maybe it's trillion nvidia uh but it that's how bubbles end when things not 27 times next 10 times 27 earnings but when you're at 40 times you know uh and so but this dislocation of other businesses you know no one feels safe you can i'm sure you could get two kids in your office and tell them guys spend the weekend and make me my own spotify and instead of paying 9.99 for spotify you're gonna get it for free and they're gonna do it they're gonna have you know claude go in there

18:01Michael Novogratz:and create their own version yeah and you can download the free stuff off of youtube or you've got a youtube premium subscription and you've got your you've got your spotify and it says and it's as good as Spotify. So if you're a Spotify though, what do you do? It's really tough. It's really tough. I think there's gonna be a lot of lawsuits that are gonna come out. We had a funny story. There was a app that, pretty simple app, but it was like 9.99. And this guy working for me texted them. He said, hey, will you change this, this, and this? And like, who do you think you are, buddy? and so he just you know used the uh the claude uh whatever version he was using and uh took their app recreated it made his changes and you literally can't tell the difference he said i saved 9.99 like think of that a million times and so i think intellectual property right how there was a there was a venture fund that just raised 250 million dollars just to do that and i i think we're going to see a whole legal, you know, a legal pushback on these SaaS businesses feeling like they're, people are just stealing their IP.

19:18Michael Novogratz:One of the things that I've learned from you among many things, and I think this is probably true of the best macro traders out there, is getting something wrong and surviving the hit and, you know, getting yourself back on your feet. I mean, obviously you're making a guess. You talked about short rates today, got it wrong. You're recalibrating. When you're looking at the war, you and I said last week, and by the way, I agreed with you that the war would be over, that this was sort of a one week, a 10 day, 15 day war. We're now into the 21st day or 22nd day of the war. Have you made any adjustments to your book as a result of that?

20:03Michael Novogratz:Do you think that the war is going to end soon? Wait a minute. We're in an escalation trap right now. When Israel blew up Iran's big natural gas field, it pissed Iran off. And they came back and they attacked seven different countries the next day, including blowing up Qatar's jewel. um not small beans big beans and that was a game changer that really was a game changer because until then you thought maybe you could you could uh you could see this um de-escalating right and you know it's funny then trump said i didn't know they were gonna do it they just were angry And, you know, he got a blowhard about, you know, being, these guys are so well coordinated, you know, to the credit.

20:53I spoke to someone deep in the war room and he said never before has he seen better coordination, not just between the U.S. and Israel, but Saudi, Qatar and UAE. You know, they are tracking every missile and deciding in live time who shoots it down from ships and planes and, you know, on land bases. The guy said it's literally breathtaking to see that this is the first fully electronic war we've ever seen. Target acquisition, tracking people, the whole thing is electronic. It's kind of fascinating and scary as shit, quite frankly.

21:34Michael Novogratz:you know but what's also scary is that iran is still firing off twenty thousand dollar drones mike and they're still shooting missiles and they just took out a portion of that um lng hub you know last night you know so so i mean you know they have less they have less rocket launchers they have less missile launchers they have less of everything but they they're not dead they still have drones and you know they don't really have a great technology yet for that Shaheed drone to knock them down. Ukraine seems to have gotten really good at it, just from what I read. And so, listen, I think from an execution perspective, the big how did this happen was there wasn't a real articulated plan for, you know, what would you do if they try to shut down the Strait of Hormuz?

22:30And everything else was planned for literally to the T it looked And so that's what we're all suffering with.

22:36Michael Novogratz:But Mike, you've got 2 ,200 Marines heading for the strait. And you have the Marine Expeditionary Force. The president said today that he's not going to deploy them. But doesn't that lengthen the war if we put boots on the ground? Listen, if we try to take, what is that, Carg Island? Yeah, that's a whole different game. then then this is a a multi-month month from here uh i think i'm hoping that that's a bluff uh but it might not be listen this could you know we have like i said we have a very difficult president to figure out because he changes his mind you know him better than i do he doesn't do pain well and let me tell you the markets are in pain uh his donors are in pain but his biggest backers right saudi abu dhabi qatar these guys have given him so much money and support they're angry as hell uh and so the real question is does he have the two to three months stomach that israel and the u.s needs to really finish off this regime and listen there you know there was a young wrestler today who got hung 19 year old iranian national champ I don't know him personally, but my guys know him.

23:56You know, he was in our world as wrestlers. Tough son of a gun. And, you know, he went to one of the protests and then they falsely accused him of murdering somebody and they hung him in the town square with no real trial. It's a shitty freaking regime. And Israel feels it's existential to their existence. So they want it. They're praying that Trump gives them the next two months. And well, it's just a question of the price of oil.

24:22Michael Novogratz:So as you and I are talking, obviously oil peaked at 117 earlier today. Prime Minister Netanyahu gave a speech in a press conference and we backed off into the mid-90s. So you think he's trying to create an off-ramp for the president? I think that's at least a scenario I'm giving some probability to. Because the president couldn't do it after his last few, you know, he's lost his credibility a little bit, been all over the place. Netanyahu comes in seriously. The president can then say the same thing. And again, what I'm trying to figure out is what the off-ramp looks like. Do we just pick up and go home?

25:03And say, would Iran be happy with that?

25:07Michael Novogratz:I just want to go to you get a trade wrong. You're recalibrating and you're rethinking about where you need to go in the future. And I want you to tie it into the war situation and your earlier comments about it's hard to trade President Trump because of the sometimes capricious nature of his decision making. You know, let's let's use short rates because it's a good example. So the Fed went from having priced in two-thirds of one rate cut by the end of the year, thinking Warsh gets in, he's going to cut rates, he's been pretty adamant that he would, to now pricing in none. And so you look at the two years that almost got to like 395, I think was the high yield, 4%.